Forward guidance means the indications (communication) given by the ECB Governing Council regarding its intentions in relation to future monetary policy, be it in terms of the key interest rates or the asset purchase programmes.
For example, the forward guidance may link the deactivation of certain instruments to the inflation figures. The ECB Governing Council has been using forward guidance since July 2013. Since then, the formulation of the ECB’s forward guidance has been adapted on a number of occasions. Forward guidance can steer the expectations of economic operators and reduce the uncertainty over monetary policy measures, thus fostering the appropriate transmission of monetary policy.